Mortgage rates in the 4's and 5's in 2023?
Kenny SimpsonBusiness Member
Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votesMortgage rates in the 4's and 5's in 2023?
Most Popular Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votesQuote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
64 Replies
- Real Estate Broker · Indianapolis, IN · Member since 2020 · 73 posts · 39 votes3y
Love the detail.
Just curious, what are your thoughts on navigating the current rates from an investor perspective? I have many clients asking themselves this same question and am always curious about new ideas.
- Lender · Southwest Georgia · Member since 2017 · 312 posts · 278 votes3y
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
Sounds like patience is the strategy at this time.
Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @John Clevenger:
Love the detail.
Just curious, what are your thoughts on navigating the current rates from an investor perspective? I have many clients asking themselves this same question and am always curious about new ideas.
@John Clevenger, if they are getting a really good deal they can always refinance later. These high rates make it tougher for deals to make sense so that is why it has to be a good deal or value ADD. Rates will be lower in 2023 and that will help with deals making more sense for sure. Do an ARM, buy down the rate or plan for the future refinance. Focusing on the rate in today's environment should be 1 part of the pie, what about cash flow, value ADD, rent increase, possible refi, adding amenities that add to rent.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @J. Mitchell Bernier:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
Sounds like patience is the strategy at this time.
Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner.
@J. Mitchell Bernier I think rates will fall faster than people think, I think when Jan 2023 hits we will see massive layoff's, FED pivot, BIG recession fears and the 10 year T will drop. Lets see what happens :)
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes3y
Margin spread may decrease and I could see rates around 5% conventional and 6% investment in 2023 but unlikely lower then that.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @Henry Lazerow:
Margin spread may decrease and I could see rates around 5% conventional and 6% investment in 2023 but unlikely lower then that.
@Henry Lazerow 100% agree, rates went to high to fast.
- 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
- 3yRobin SimonBusiness MemberLender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I think there is a good chance of this happening, probably towards the back end of 2023. The Fed rates at 5% is simply not sustainable for too many months, let alone years considering the gov't debt burden. Inflation looks to have definitely peaked and we should start to see a big uptick in unemployment. Rates will likely be headed down in my view
Harpoon Capital514 Reviews - 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Kenny Simpson:
Quote from @J. Mitchell Bernier:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
Sounds like patience is the strategy at this time.
Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner.
@J. Mitchell Bernier I think rates will fall faster than people think, I think when Jan 2023 hits we will see massive layoff's, FED pivot, BIG recession fears and the 10 year T will drop. Lets see what happens :)
In 4-5 weeks?
I think that starts in Q1 '23, but doesn't really draw out till H2 2023. This doesn't make the fed reverse course, but just hold. I think that's the fundamental difference in our thinking. Overall, rates cannot be super high for an extended period of time due to national debt but super high is relative. What is super high? I think Fed Funds can remain 4.5-5% for 6-10 months with no problem starting this January. And 3% for years.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Dan H.:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
You think Fed raises rates into Q2 '23? I agree with almost everything you put in there, and I assume you are a believer of renter nation coming to fruition?
I think we raise rates here in Dec with the half basis as expected, get us to 4.25-4.5 Fed Funds. Then I think we do it one more time in Q1 23. Get us to 4.75-5. I think we sit there for at least 2, if not 3 quarters. Unemployment will tick up heavily end of Q1 into Q2 and that's when the realization of this consumer debt: personal savings disaster that's been brewing will show up.
- Rental Property Investor · Russellville, AR · Member since 2014 · 684 posts · 509 votes3y
I think the Fed acted a little too fast with their rate hikes. I think we will continue to see inflation drop regardless of their actions from this point forward. 5% mortgage rates are very much a possibility next year. I am no economics expert, but that's my belief!
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes3y
Quote from @Kenny Simpson:
Quote from @J. Mitchell Bernier:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
Sounds like patience is the strategy at this time.
Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner.
@J. Mitchell Bernier I think rates will fall faster than people think, I think when Jan 2023 hits we will see massive layoff's, FED pivot, BIG recession fears and the 10 year T will drop. Lets see what happens :)
I hope you're right, but I'm going to make the assumption that won't happen so I'm not disappointed.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @Dan H.:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
@Dan H. I was referring to long term mortgage rates NOT FED funds rate. I agree FED will continue to raise FED fund rates into Q1/Q2 2023 for sure and they just did another 75BPS as you know and the 10 year treasury dropped 50 BPS + quickly. Long term rates already have a .75 BPS to 100 BPS increase in margin spread do to risk, that will come off the table soon and lower rates just based off that and that would put my 30 year fixed rate in the 5.25% to 5.5% ish range. If the 10 year T drops more do to recession fears rates will drop lower.
Here is the chart, 10 year treasury vs 30 year fixed, they are usually 180 to 200 BPS apart and when near or during recession that number can go way up. So if the 10 year T is at 3.7% today the 30 year fixed rate would be at 5.7% today if NOT lower just normal.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @Paul De Luca:
Quote from @Kenny Simpson:
Quote from @J. Mitchell Bernier:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
Sounds like patience is the strategy at this time.
Don't think we will see rates below 5% for a long time, but even at 5.5% that makes many investments way more attractive. I think if rates fall to around 5.5% the buyers will come back in droves and the market will rebound. Think that won't happen till 2024, but hopefully sooner.
@J. Mitchell Bernier I think rates will fall faster than people think, I think when Jan 2023 hits we will see massive layoff's, FED pivot, BIG recession fears and the 10 year T will drop. Lets see what happens :)
I hope you're right, but I'm going to make the assumption that won't happen so I'm not disappointed.
@J. Mitchell Bernier, LOL it is NOT about being right, it is understanding the data and what is going on in the overall market. Rates will come down next year for sure, they just did off lower CPI numbers. Stay tuned.
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @Billy Daniel:
I think the Fed acted a little too fast with their rate hikes. I think we will continue to see inflation drop regardless of their actions from this point forward. 5% mortgage rates are very much a possibility next year. I am no economics expert, but that's my belief!
@Billy Daniel, 100% agree, rates will fall and they already started too
- Lender · San Diego, CA · Member since 2022 · 137 posts · 96 votes3y
Quote from @V.G Jason:
Quote from @Dan H.:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
You think Fed raises rates into Q2 '23? I agree with almost everything you put in there, and I assume you are a believer of renter nation coming to fruition?
I think we raise rates here in Dec with the half basis as expected, get us to 4.25-4.5 Fed Funds. Then I think we do it one more time in Q1 23. Get us to 4.75-5. I think we sit there for at least 2, if not 3 quarters. Unemployment will tick up heavily end of Q1 into Q2 and that's when the realization of this consumer debt: personal savings disaster that's been brewing will show up.
@Dan H., I do because of 1 statement by the FED, it is easier to drop rates rapidly, AKA like I did when COVID hit then have to raise them again. Raising them because he pivot too fast would kill us. Worst case he went to far, he can pivot as you know really quickly. I think we will see 50 BPS, 25, 25 at least and then let it sit there, unless data is NOT in our favor. I do agree unemployment is about to hit hard right at the start of the year, mass layoffs, waiting for holiday. Renters nation is happening for sure, BIG wallstreet buyers will be back at it in Q1, they are ready.
- Real Estate Agent · Southern California · Member since 2019 · 681 posts · 281 votes3yIm hoping the spread lowers t drop rates even lower! If they get to a 4% again I worry there will be another huge increase in housing prices.
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Nicholas Coulter:
Im hoping the spread lowers t drop rates even lower! If they get to a 4% again I worry there will be another huge increase in housing prices.Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
That's when we have hyperinflation. And will cause renters nation for sure.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Kenny Simpson:
Quote from @V.G Jason:
Quote from @Dan H.:
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
I do not see it happening because housing is too large of a segment of the economy. Housing consists of many renters and rents are increasing at a crazy rate. Core Logic recently released numbers showing YOY rent increased almost $700 for a San Diego SFH. In case you think that has slowed, the quarterly increase was $130 which is not quite as fast, but still way too fast.
The issue is there are many reasons rents are increasing and raising rates does not help lower the rent increases. Increased rates makes it more difficult for first time buyers because 1) the financed payment goes up 2) it decreases movement which results in boomers, etc not downsizing which lowers volume on the market and helps keep the prices from falling.
Other drivers for these large rent increases are the recent property appreciation (last 10 years have had huge RE appreciation) and rents lag the property value increases, the Covid eviction moratorium has identified new risk that must be reflected in the income, the continuing trend to move to high growth areas which results in a large housing shortage in these areas, the lag of new housing starts that has existed since the Great Recession.
Therefore, the rate increases cannot address a primary source of inflation, but the fed has few tools available to fight inflation and raising rates is their primary tool to fight inflation. It will take many months to get inflation to a tolerable level. My belief is fed would find 4.5% tolerable, but even if you believe 5% is tolerable, we are not close to being there.
I expect fed to increase its rates at least 2 more quarters and would not be surprised if it is significantly more than 2 quarters. Fed raises rates typically results in increased mortgage rates.
I think we are in for a bumpy ride.
You think Fed raises rates into Q2 '23? I agree with almost everything you put in there, and I assume you are a believer of renter nation coming to fruition?
I think we raise rates here in Dec with the half basis as expected, get us to 4.25-4.5 Fed Funds. Then I think we do it one more time in Q1 23. Get us to 4.75-5. I think we sit there for at least 2, if not 3 quarters. Unemployment will tick up heavily end of Q1 into Q2 and that's when the realization of this consumer debt: personal savings disaster that's been brewing will show up.
@Dan H., I do because of 1 statement by the FED, it is easier to drop rates rapidly, AKA like I did when COVID hit then have to raise them again. Raising them because he pivot too fast would kill us. Worst case he went to far, he can pivot as you know really quickly. I think we will see 50 BPS, 25, 25 at least and then let it sit there, unless data is NOT in our favor. I do agree unemployment is about to hit hard right at the start of the year, mass layoffs, waiting for holiday. Renters nation is happening for sure, BIG wallstreet buyers will be back at it in Q1, they are ready.
Question is how long do we see it sit there? And the reciprocating question is if he moves too quickly to de-escalate the rates do we see an uptick in CPI that very next month. The read and react game makes me think Fed will hold tight a little too long. Just to be sure. If he doesn't, it'll cause some long term damage if he has to reverse course when he starts to bring it down. I think 1-2 quarters. 2 is quite long but should damage it. I think timing wise 2 makes sense for the election too. Start de escalating .5-.75 BPS q4 23, q1 24, q24. Get fed funds to 3 by H2 24, then q3 re assess if sitting good then do 1BPS drop leading into '24 election.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
It is well known what the Fed will do, everyone is over-complicating it.
Through all history how many times has the Fed acted in a good PRO-active manner? Exactly, 0.
The Fed, by it's very design, is a RE-active apparatus. The Fed has given us there finish line of 2% inflation. What will the Fed do? They will keep attacking until they get to there finish-line, OR until they move the finish-line.
As Fed keep at things, it will keep increasing the returns on other investment vehicles. Remember, Mortgages get sold to someone, and while it's a long custody chain with many "horse-swapping" in the mix, at end of day is the investor who is deciding where to plop down another few dozen million. MBS has to be attractive vs other options, as those other options gain in returns, this presses mortgage rates UP to remain competitive for those investment $'s. There is a lot more to it then just a Fed rate.
- 3yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
So... waiting on the Fed to do something is a mistake 99.9% of the time.
Better to accept today's rates over waiting and gambling on lower rates in 2023.
I agree with @James Hamling on the "reactive" nature of the Fed. I deal with it on a state level at my 9-5 and it drives me insane.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Kenny Simpson:
The FED is slowing pace on rate hikes, the consumer is slowing and the economy is headed into a recession? These are all guesses at this point and some believe this will happen or is happening. If the FED eases with less rate hikes, that is signaling they need to slow down because the rate hikes are working and inflation is coming down. We have had recent reports that inflation is slowing 9% + to 7.7% and that has already had an affect on long term rates. The 30 year fixed mortgage as I type this sits around 6.125%, conventional NO POINTs and VA 5.5% NO POINTs. Those rates just weeks ago were .5%+ higher.
Do you see VA/FHA rates in the 4's and conventional in the mid to low 5's is possible by Q2 of next year? If that is the case we are talking new buyers saving $800 + a month here in San Diego on entry level homes. Home prices lower, rates lower, seems like the perfect storm for first time home buyer or to pick up your first investment property?
it's all possible by looking at auction data and the outlook of long-term bond, the dollar is also reaching the may level where house is at peak. it seems optimistic view is possible.
ARM 5/1 for 5.40% is already available today - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Jaron Walling:
So... waiting on the Fed to do something is a mistake 99.9% of the time.
Better to accept today's rates over waiting and gambling on lower rates in 2023.
I agree with @James Hamling on the "reactive" nature of the Fed. I deal with it on a state level at my 9-5 and it drives me insane.
thing is the Fed , whatever they did, is always considered as mistake :) and whatever the Fed did, the market doesn't care anymore. LOL
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3yThe spread between the 10-year treasury and mortgage rates will not return to normal levels until the Fed and the banks start purchasing MBS again, neither of which are imminent in a volatile rate environment. They are shrinking the economy to greatness...
Quote from @Kenny Simpson:
Quote from @Dan H.:
Quote from @Kenny Simpson:
Here is the chart, 10 year treasury vs 30 year fixed, they are usually 180 to 200 BPS apart and when near or during recession that number can go way up. So if the 10 year T is at 3.7% today the 30 year fixed rate would be at 5.7% today if NOT lower just normal.
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